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Medtronic (MDT) Q3 Earnings: Disappointment in the Cards?

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Ireland-based medical device major Medtronic plcMDT is slated to report its third-quarter fiscal 2017 earnings on Feb 21, before the opening bell.

Last quarter, the company posted earnings of $1.12 per share, surpassing the Zacks Consensus Estimate by a penny. In fact, Medtronic's earnings have outpaced the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 0.92%. Let's see how things are shaping up prior to this announcement.

Factors at Play

With Medtronic recording a significant percentage of its sales from the international market, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener for the company over the last few quarters. Considering this impact, for fiscal 2017, Medtronic anticipates currency headwind to the tune of approximately 20 cents to 22 cents.

Medtronic PLC Price and EPS Surprise

Medtronic PLC Price and EPS Surprise | Medtronic PLC Quote

Also difficult macroeconomic conditions in certain countries across the world have led to reduction in healthcare budgets and increased pressure on utilization. Management has projected that the company's revenue growth is likely to remain under pressure in Middle East in the rest of 2017, which will affect the forthcoming quarterly results.

Given the current macro-economic trend, Medtronic had earlier lowered its revenue growth guidance for fiscal 2017. The company currently expects revenue growth for the fiscal to be within the mid-single digit range compared with its original expectation of the upper half of the mid-single digit range. Earlier, during the fiscal second quarter earnings release, the company declared that full-year revenues will be adversely affected by approximately $20-$60 million, including an average of $10-$30 million negative impact in the third quarter. The lowered guidance is all the more disappointing, indicating no chances of improvement down the line.

Notably, there have been multiple developments which should get reflected in Medtronic's to-be-reported quarter's results. Under the Cardiac and vascular group, Medtronic received IDE approval from FDA for its IN.PACT Admiral drug-coated balloon. It added new tools to expand its coronary suite and received reimbursement approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) for its transcatheter CoreValve Evolut R System. Very recently management also received FDA approval for its FreezorXtra Cryoablation Catheter to treat patients with abnormal heart rhythm. Under the Diabetes Group, the company recently joined forces with Fitbit to create an integrated diabetes care management program. Within the Minimally Invasive Technologies Group, Medtronic received CE Mark for the Endurant II/IIs stent graft system to treat abdominal aortic aneurysm (AAA) patients.

Thus, we expect the company to witness strong share gains from the flow of recent product launches, which should also get reflected in the fiscal third-quarter performance.

In this regard we note that, there has been no change in the estimate revision trend over the last seven days. The same can be observed in the magnitude of the estimate revision trend with earnings estimates remaining at $1.11, over the same time frame.

Earnings Whispers

Our proven model does not conclusively show that Medtronic is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Medtronic has an Earnings ESP of -0.90%. That is because the Most Accurate estimate is pegged at 1.10 whereas the Zacks Consensus Estimate is pegged at $1.11. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Medtronic has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:

Masimo Corporation MASI has an Earnings ESP of +3.51% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Exelixis, Inc. EXEL has an Earnings ESP of +200.00% and a Zacks Rank #2.

Zynerba Pharmaceuticals, Inc. ZYNE has an Earnings ESP of +2.74% and a Zacks Rank #2.

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Masimo Corporation (MASI): Free Stock Analysis Report

Medtronic PLC (MDT): Free Stock Analysis Report

Exelixis, Inc. (EXEL): Free Stock Analysis Report

Zynerba Pharmaceuticals, Inc. (ZYNE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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